FRANCE: Laurent-Perrier defends price rises amid sales slide

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Laurent-Perrier, which this week reported full-year sales down 27%, has defended its decision to raise prices for its Champagne as many of its key markets faced recession.

Prices for the Laurent-Perrier brand rose by 16% in the year to the end of March, said the group this week.

Volume sales subsequently fell by 32% for the year, with net sales down by 27% to EUR181m (US$257m), as the world's economies weakened. Net profits fell by 45% to EUR18.9m.

There was, however, no hint of regret for the firm's change in pricing strategy. "In recent months, in an extremely tough business climate, our operating margin has held up well, due to the premium positioning of our brands and rapid action to adapt our cost structure," said Stephane Tsassis, Laurent-Perrier chairman.

Neither did investors appear particularly perturbed, with Laurent-Perrier's share price rising by nearly 7% to EUR46 following the results announcement. That price is more than 50% lower than this time last year and 20% lower than at the beginning of 2009, however.

Tsassis said that the group, which is the fourth largest Champagne house, will "maintain our long-term strategic course".

The firm added: "The sharp deterioration in the economic climate in the second half has meant that it has so far not been possible to benefit from the redeployment of the Laurent-Perrier brand within its specialist and selective distribution channels."

The group did not supply sales or earnings guidance for its fiscal year 2009/10.

Independent analyst Véronique Adam said: "We feel that sales could go further down this year, as a result of the existence of excess inventories in the trade (around 60m bottles worlwide). It might take 12-18 months to restore a balance in Champagne."

France's wine and spirits export trade body, FEVS, this week predicted that Champagne exports could fall by 35% in volume terms for the 12 months of 2009.     

Adam, who was a food and beverage analyst with JPMorgan for 15 years and this year founded analysis site Pablofinance, said that Laurent-Perrier sales by value could slip by a further 10% in fiscal 2009/10.

"Beyond 2010, we expect the Champagne business to return to growth and Laurent-Perrier to benefit from its superior brand image, notably in the highly valued 'rosé' segment," she added.

On this basis, and based on the group's historically low share price, Laurent-Perrier "should remain a very attractive takeover target", said Adam, who also published her comments on the Seeking Alpha website

Laurent-Perrier said it expected Champagne sector volume sales to return to 2% per year growth in the "medium-term".

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